How to Repay a Reverse Mortgage After Death
If you are the heir to a borrower who has a reverse mortgage who has passed, here are the steps we recommend you follow:
Time to Payoff Reverse Mortgage
Generally you will have up to 6 months to refinance the reverse mortgage into a loan of your own, or up to 12 months to sell. (Each 3 months requires an extension by the loan servicer.)
Step 1.
Locate the last reverse mortgage statement. We have guidance here for how you can read the statement, so you know what you are dealing with.
Step 2.
Contact an elder real estate specialistt in your area. You may not even want to sell the home for sure, but it is best to know how much the home would most likely bring in a sale. This type of specialist can also help you with estate sale information if you need it.
Step 3. (Can be working on at the same time as one and two)
Perfect your title to the property. The home may need to go through probate to sell or transfer title to you, to a relative, or to a third party. Contact an estate attorney to determine the best and fastest way to accomplish this (if the borrower had an attorney that would be a great place to start).
The attorney can advise you of any potential delays or liabilities for transferring title, but you can’t transfer title to anyone else in a sale or otherwise if it is still in the original owner’s name.
Step 4.
Decide if you want to keep the home, give it to a family member, sell it or walk away and let the lender take it back. If you decide you want to keep the home, you will need to pay off the balance of the mortgage or 95% of the current market value if the balance is more than the home is worth. If you decide to sell the home or give it to another family member, having the elder real estate agent ready to go and title in your name will get you going in the right direction.
Step 5.
Talk to your reverse mortgage lender. Once you have all your decisions made and are ready to act, if the lender has not contacted you already, you are ready to contact the lender to tell them your plans. The lender will probably have found out about the passing already. They may have contacted you to let you know the loan is due and payable, but they may not have your information.
If you know what you want to do and can contact them with your plans in place before they even notify you (their contact info will be on the statement), then your plans will not be delayed by them not being ready to act when you are ready to sell or refinance the loan. They have things they must do on their end including appraisals, contacting HUD, etc. and if you are ready to proceed, you can eliminate unnecessary delays.
Step 6.
If all plans point to the fact that the property is not worth enough to sell and you do not want to keep it, get ready to walk away. Be sure to have all your loved one’s belongings removed from the property that you wish to keep. Then the senior real estate professional you consulted in the beginning can probably connect you with an estate sale professional in the home.
These individuals will conduct a sale of all the personal items you did not remove and then donate all remaining items at the end of the sale. Many times, this can help pay some final expenses as well as provide some tax benefits with donations. Be sure to talk to your tax specialist to determine what receipts, etc. you will need to file the final tax returns.
Michael G. Branson (CEO All Reverse Mortgage Inc. and moderator of ARLO™) has 40 years of experience in the mortgage banking
industry and has devoted the past 14 years to reverse mortgages exclusively. Michael G. Branson was part of the team that introduced the first fixed-rate
jumbo reverse mortgage to market, which was sold to a private investor in 2007.
20 Comments on this Article
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deb papadopoulos July 11th, 2019
RE: Reverse Mortgage & Probate
Which part of the home, the assessed value or the balance due to reverse mortgage company is considered an asset, if any? Is payment due considered a debt?
Good Morning, I don't know if I fully understand where you are headed with this but let me see if I can explain, in on-accounting terms because we are not accountants, how lenders look at borrowers' assets and obligations. Your home is your asset. The value of the home, not the assessed value but the market value, is the value of the asset. Your assessed value may be much lower than the actual value especially if you are in an area that limits tax increases and the home could sell for much more than the tax assessed value. In some instances when property values were declining, assessed values were above market values but we have not seen that much for several years now. The balance owed on any liens or loans are considered obligations or debts. Lenders are not usually concerned with the Net Value of the borrower which is something an accountant might be more interested in when determining an individual's net worth. Since the reverse mortgage requires all other liens and loans to be paid off at the time the loan is closed, there will be no other loans on the property and the reverse mortgage calculator will determine the amount of the loan available. Therefore, the maximum amount the borrower can borrow as a percentage of the home's value is determined by the calculator and it takes into consideration other factors such as borrower ages, interest rates and HUD lending limits as well. The other type of "debt" lenders does review is something that reverse mortgage lenders refer to as monthly obligations. They look at what you are required to pay for any loan payments, credit cards, court ordered payments, etc. and to that they add your property charges. The property charges are the taxes, insurance, any HOA fees if applicable and any other assessments you are required to pay on the house. HUD also currently uses a .14¢ per square foot cost for total utilities (they may switch to actual utility cost at some point but have not as of this time). After all the charges are added, the total is subtracted from your income and you must meet their residual income guidelines. The residual income required changes based on location and family size. Borrowers should note, there are other ways to offset debts or dissipate assets in order to qualify so borrowers should not be afraid to check with a lender about their circumstances if they feel they may not meet the minimum residual income.
My mom has a reverse mortgage. When she passes, do I as an heir, sell the property, pay off the loan, and keep the remaining monies, or does the lender sell the property and give me what's left over?
Hello Randolph, Your mom decides who does what with the property in her will or trust and you all proceed accordingly. The lender has a loan on the property, they don't own it. Therefore, hopefully mom has directions by way of a will or trust that will determine which heir will act as her executor and what the disposition of the property will be. The loan will be due and payable at that time so whatever the heirs decide to do with the property (keep it or sell it), they will have to keep in mind that the loan will be due and plan accordingly. This means that if you are the one tasked with the final disposition of the property, you could choose to sell the home or keep it. If you sell the home, all equity in the property belongs to the estate and you should probably speak to an estate attorney to determine the best way to divide the proceeds.I may be incorrectly presuming that there are other heirs, I just saw that you used the term "an heir" and not "the heir" so if I am wrong, even if you are the sole heir, I don't think it's a bad idea to discuss options with a professional. Either way though, you will need to pass the title from mom to you so that you can sell it and that could also include a probate. If mom is fully competent now and the property is not in a trust, you may want to visit with an estate attorney now to determine if this is a good way for you to proceed, before mom can no longer sign legal documents. I cannot give you legal advice, but I can advise you to seek out the assistance of a good estate attorney who can before the time comes because I know from first-hand experience and from speaking to many families that it is much easier to do things while mom is still alive and able to communicate her wishes than waiting until later when people are grieving and then it takes legal proceedings to accomplish title changes, etc. and you are then working against a ticking clock as that loan is due. Knowing the plans also takes out any possible family disagreements, especially caused when parents pass without leaving written instructions and no clear path to achieve the plan.
My mother and father took out a RM several years ago. My mother passed 3 yrs. ago and my dad just passed away in May. I am an only child and I'm not sure all the documents that I will need to send other than death certificates and intent to buy from the bank my son is going to use to buy the house. As far as I know I'm only listed as a contact person on this loan. Can you advise on what other documentation I will need?
Hello Denise, You need to get your title in order. I would suggest that the first thing you do is contact an estate attorney to determine what steps you must take to become the lawful owner of the property. I don't know if you are the heir by will, if the property was in a trust or what the probate requirements will be in your area, but an attorney can guide you through all of that. Once the property title has passed from the estate to you, you can then do whatever you want with it. Your son does not "buy" the property from the bank and the bank cannot sell it to him at this point. Mom and dad or the estate, anyway, still own it and the bank only has a loan against the property for collateral. The title needs to pass to you as the heirs based on what mom and dad directed or through a court order if you are the only heirs and your parents' wishes were not written in advance. If there are other possible heirs, this may take a while. Once you own the property, you can take the steps needed to secure a new loan to pay off the reverse mortgage, whether than is in your name, your son's name, both your names or whatever (unless of course you have the funds available without having to use a loan). Any steps needed for a new loan will depend on who is going to live there, what the new lender requires, etc. but will have nothing to do with the reverse mortgage. The reverse mortgage lender cannot even work with you on the loan yet as you are not a party to the transaction, and they do not have legal authority to do so unless your parents already gave them written authorization which is doubtful. You may have been listed as an alternate contact, but all that did was allow the lender to contact you if they could not reach the borrowers. It does not allow the lender to negotiate the payoff of the loan with this contact individual because they have no way of knowing if you are also the heir and they will not get into the middle of any possible disputes. That would be for the court system to decide. That's why it is so important for you to clear the title as soon as possible. If mom and dad had a trust or will, that will probably be much quicker but again, you need an attorney to help you get through that as quickly as possible. The steps you will take once the title is clear would be to determine how you are going to pay off the loan. It sounds like you have already decided not to sell the property, so you need to know the property value at this time. As the heir, you can pay off the loan for the lower of the amount owed, or 95% of the current market value. Look at the most recent statements your dad had from the lender and compare the outstanding balance to the property values in the area. That will give you an idea of what you will have to repay. Then you will know what kind of loan your son or you and your son will have to get in order to repay the existing reverse mortgage if you must apply for financing. I do not know what lenders would say about actually applying for a loan before you have clear title, but it would not hurt to talk to some, let them know what you are doing and at least get an idea of the qualifications needed. That way you can have everything ready to go for the time that the title is transferred to your name because at that time, you can move forward with the new loan to repay the reverse mortgage and if you wait until then just to get started, you will have wasted time that you may need to close the new loan.
Hello. I have a question about my mother's reverse mortgage. My mother had a reverse mortgage done on her home about 20 years ago. She has since died., June 3, 2018. Myself and my family have been living at the home. We sold the house 2 months ago and have yet to have a closing. What will happen if the closing doesn't happen until after the 3rd of June 2019. We only have until then to move and turn it over to the reverse mortgage company. Please help, we have a daughter that has cerebral palsy and a son with whom has autism. We real need the small amount that will come with the sale to get a suitable place to move to.
Hello Shannon, It's very difficult for me to advise you based on the limited information you have supplied. The reverse mortgage company can only deal with verified heirs though so I can only ask what steps you took to sell the home? Was there a will? Was the property in a trust? Did it have to go through probate? Like the lenders for all loans, the reverse mortgage company cannot supply information to any third party without the proper authorization and if your mom did not provide that authorization to the company while she was still living, then you must be sure to follow the proper legal steps to sell the home. The reverse mortgage lender will not make the determination as to who can and cannot act on behalf of the estate, there are legal steps for this, and you must follow those steps. I do not know what you have done or what your state requires, but I would suggest you contact an attorney if you have not already done so and you have not taken the legal steps to clear the title. The problem you may have is that the title company and the lender cannot act to allow the closing without the legal cover to know you have the right to sell the property in the first place. That may take a court action to complete. Without knowing if there are other heirs that could have a claim, if there are other creditors, etc., the lender and the settlement provider will not proceed with a closing. An estate attorney in your area will know exactly what you need to do to proceed with the transaction.
I moved in with and care for my 102 year old grandmother after her live-in daughter passed away. There is currently a reverse mortgage (line of credit) on her home. My intention is to pay off the loan and purchase the house, but I dont want to wait until she passes to get this done. I've heard some reverse mortgage lenders start selling the home immediately upon notification of the borrowers death. Can my grandmother sell the house to me now so I can get a VA home loan to cover the balance due on the reverse mortgage? The payoff is about $38K, but the house is appraised at about $112K. Thanks for any information.
Hello Jason,Your Grandmother owns the home and can sell to whomever she pleases. If she wants to sell the home to you now, she can certainly do so and there is no prepayment penalty ever on a reverse mortgage.
I am selling a property that has a reverse mortgage on it and the owner passed almost a year ago next month. However, when I asked my seller if they had informed the note holder of the owners passing he said that he did not want to disclose that information. He is the executor of the trust. I have had several offers on the property and he has declined them all. Now he is talking about remodeling the home which can be several more months. Should I be concerned about anything?
Hello Jami,The seller is playing a dangerous game. He's hiding the fact that the owner has passed and may be falsifying occupancy certifications to the lender (they go out annually and it's hard to say for sure, but chances are that one has gone out since the owner passed unless the timing was such that it went out just before the owner passed and it hasn't been a year yet). If he has not been truthful and the lender discovers this, they will be much less likely to delay before initiating foreclosure proceedings. Furthermore, if he collected additional draws on the loan after the borrower passed by supplying the lender false information, the lender could choose to act on that. If the heir simply has not said anything and has not sent any untrue information to the lender, chances are if the lender discovers the passing of the borrower they will just call the loan and the heir might just have a little more incentive to close the sale with no real consequences. But he is accruing interest on the loan this entire time even if he hasn't done anything to take additional funds. Have you seen a monthly statement? You may want to be sure there is enough equity in the home.
My friends father passed away over a year ago. She keeps trying to get in touch with Novad and they will not return her calls. She had an attorney and he had no luck either. She has thought about renting the house to keep squatters away. What risks are there? She is keeping the power on and the taxes paid.
Hello Kim,The loan is already due and payable. Has your friend done anything to make sure the title to the home is in her name? If so, then she needs to do whatever she can to pay the loan off before they start a foreclosure action. Her attorney can work with a title company to request a Beneficiary's Demand for Payoff but if your friend does not have sufficient funds at her disposal now and cannot get a new loan because she is not on title to the property, then she would not be able to repay the debt and ultimately that is what she will need to do in order to keep the home â rented or not. But make no mistakes, the lender will begin foreclosure soon and if it looks like the heirs are not doing anything to repay the obligation (are not listing the home for sale or in the midst of a refinance) and have rented the home instead, I believe that would hasten their actions.
My Mom had a Reverse Mortgage serviced by Novad. She passed away 2 months ago (12-28-2018). We notified Novad and they received our package on January 31, 2019, with all requested documents and the written statement that we wanted to do a Deed-in-Lieu transaction. Since then I have tried twice a week to talk to anyone who can tell me what is going on with the process, but, though I'm always told a Loan Specialist will call me within 48 hours, I have NEVER received a call back. The house is empty, vacant and ready to transfer but I am very concerned about vandals and the liability posed by the pool and spa in the backyard while Novad refuses to speak to me or move the process forward in a timely and safe fashion. Several of your articles mention the Deed-in-Lieu process as an easy and practical way for heirs to satisfy the Reverse Mortgage when there is no equity in the home. What is the usual timeframe to complete this transaction? Would Novad hurry up if I retain an attorney? The house is in a Trust and I am the Trustee (they have all this documentation). I worry that they will drain the Estate of funds if they drag this on, or worse, the house could be compromised by being vacant. My Mom was not a wealthy woman which is why she had the Reverse Mortgage to begin with! Homeowners Insurance on a vacant property with a pool is very expensive, as well as all the other maintenance services, taxes and utilities required each month. How long does this quite simple transaction usually take?
Hello Anne, I am not sure which articles you are referencing, but I don't think we have ever stated or implied that the process would happen extremely quickly. There are several things that the lender must do before they can accept your property by way of a Deed in Lieu of foreclosure. I don't know when you first contacted them, but if mom passed away 2 months ago, they typically don't talk to the family for 30 days or more after that so I can't see this having been a terribly long time at this point. The lender must contact an appraiser and have an appraisal conducted on the property. I know you have indicated that you are willing to sign the Deed in Lieu, but they must know the value as well as make sure the that home is at a minimum "broom clean" with no more personal belongings in the home. They must also have a title company perform the title work to be sure there are no other liens on the property. If the lender accepts a home that is full of a borrower's personal property or has other liens on the home, they incur liability with those issues. If they must go through a full foreclosure, they are protected by law under the foreclosure laws and can complete the foreclosure, have any personal effects removed and it would be up to any other lienholders to either protect their interest or subordinate liens would be removed with the foreclosure. The lender/servicer does not even know if they have any of these issues usually in the first 30 â 60 days and it takes a while to get the title, appraisal and all other items required together. When you compare a Deed in Lieu of Foreclosure time frame to a foreclosure though, the lender must do the same appraisals, title searches, etc. but does not have the additional 150 â 180 days that a foreclosure would take so the timeframe is usually much quicker. I can't tell you exactly how long it will take because the timing is different in different areas and depending on different circumstances. If the property is completely empty and if it is broom clean with no other liens, the lender can still only move as quickly as the service providers for appraisal, title and other services need for their end of the transaction. If everything comes together without delay, it should not be a protracted process. If things pop up on title or if there are no appraisers available, etc, the timeframes will be delayed and that delay will depend on when everything can be obtained, if at all. In some cases, a Deed in Lieu of Foreclosure can never be accepted because of secondary liens that have been placed on the home subsequent to the reverse mortgage. About the servicer not getting back to you, that I cannot understand. Novad is HUD's servicer. Once you supplied the necessary documents to them to show that you have full authority to speak on behalf of the borrower, they certainly should be working with you as if you were the borrower yourself. Have they asked for any additional information or indicated in any way that the documents you sent to them are insufficient? I don't know if Novad would be any quicker if you retain an attorney, but an attorney may be better at determining their needs and supplying them with missing information, but that is entirely up to you. If Novad has everything, there should not be any delays above and beyond the time needed to get everything they need to accept the Deed in Lieu. I wish I could be of more assistance with why they are not communicating but I really have no idea at this point what is preventing that communication.
Great information, my parents had a reverse mortgage, started at $216.240.00
at least 15 years ago, loan balance now is 368.928.61...my father passed away 2 years ago, my mother is being taken care of by my brother 24/7, she is 94.. doing fairly well....we are not on the loan, so is our only option to get a new loan?
If you are referring to when she passes and you want to keep the home, the answer would be yes if you don't have the cash to pay the loan off outright.If she lives in the home there is no payment due but once she no longer lives there, the loan will become due and payable. If you plan to keep the home, if you all have the resources to pitch in an pay the loan off, you can do it that way or it would take a new loan to repay the debt.Let me commend you. You are very wise to be looking at it now even if mom is doing well. Too often heirs wait until after their parents, etc. have passed and then time is short if financing is not readily available for one reason or another. Things can get messy if there is any dissention in the family as to what the final plans will be (which we see often when there is one family member already living in the home). It pays to have a plan with agreement by all parties.
My mother passed two months ago. I was added to speak when she was alive. I was her caregiver and on SSDI in which she required care 24 hours a day. Before signing for the Reverse Mortgage she specifically asked what happens to me and because I am 65 they said it would pass on to me. But I received a letter asking my intentions. What really happens next? After her death I paid out of pocket over $1200 to catch up her taxes and currently this is home for me.
Hello Jeannettea, The loan never just passes on to someone else after the borrower permanently leaves the property, whether because of death or because they move to an assisted living facility. When you were added as a person eligible to speak on behalf of your mom about the loan, that just means that you have authorization the lender needs to discuss the loan with someone other than the borrower. Because of financial privacy laws, reverse mortgage lenders cannot divulge personal information or discuss a loan with a third party, even a son or daughter, without consent of the borrower or a court order. You have that consent but that does not help you about the loan now. The loan is now due and payable with mom no longer living in the property. Under the terms of the reverse mortgage, as the heir. You can sell the home, refinance the loan with a new loan in your name or pay off the loan with other funds available to you. If the amount owed on the reverse mortgage is more than the current value of the home, you can pay off the balance for 95% of the current value instead of the full amount owed. If you do not wish to refinance or sell the home, you also have the right to walk away from the property and owe nothing, regardless of how much is owed and what the value is. My suggestion is to first decide what you want to do and what you can do. If you want to keep the home but don't feel as though you could get a new loan to refinance the balance of the reverse mortgage, you need to find out how much equity is in the home (if any) and take steps to protect that equity. Contact a real estate professional in your area and determine the most probable selling price of the property. Compare that to your mom's most recent statement to determine whether there is equity in the home. You need to make sure the property title is in your name if you intend to sell it. If you are not on title, you cannot sell the home or get a new loan on it so as soon as you determine that there is enough equity to get a new loan or to sell, you need to work quickly to obtain title to the property. If you are getting a new loan, then you would show the lender that you have taken those steps and they should be willing to work with you to complete your financing. If you are selling the home, again, once they see that you have taken the steps to clear the title and have listed the home for sale, they will work with you to allow you to complete the sale and can give you extensions as necessary. The one thing you don't want to do is just wait until they decide you are not making any efforts to repay the obligation and place the property into foreclosure. The more proactive you are, the better your chances of retaining some equity in the home.
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